While governments hold the legislative power to make and enforce greener policies, the world’s wealthiest individuals and company-owner groups have vast personal fortunes to spend exactly as they see fit. There is still plenty of criticism reserved for the ultra-wealthy in terms of their negative impact on climate change, but increasingly the positive power of billionaire-backed philanthropy is being felt in this global struggle.
Can Billionaire Philanthropy make a Dent in the Global Climate Crisis?
Share the wealth – billionaires giving away their fortunes for the world’s benefit
Usually, when stories of billionaires ‘divesting their assets’ make it into the news, it’s for tax avoidance reasons. However, this trend has been broken sharply in recent months, with several high-profile cases of genuine billionaires pledging to simply give up their massive personal wealth in the service of mitigating climate change.
Mid-September saw the inspiring example set by Patagonia founder Yvon Chouinard. He has pledged the entire resources and future efforts of one of the world’s most successful sportswear brands to combat the climate crisis. Every dollar earned in profits by the company will go to protecting natural ecosystems, stopping global warming, and supporting biodiversity in critical locations worldwide. The founder turned philanthropist likened it to ‘going purpose’, rather than ‘going public’.
At the very end of September, the Prince Albert II Foundation signed into effect a new partnership with UBS Optimus Foundation Europe and UBS Monaco to focus intently on social financing. Prince Albert is deeply passionate about promoting sustainable land use and protecting coastal and marine ecosystems. The opening project of this new partnership, which controls hundreds of billions of dollars between its members, is to boost conservation projects in the Pelagos Sanctuary area, a marine territory of 87,500 square kilometres in the waters off Monaco, France and Italy.
Bill Gates, whose philanthropic credentials are already long, storied and impressive, also stepped up his efforts earlier this year when he pledged to drop off the world’s wealthiest list. Starting with another $20 billion donation to the Bill & Melinda Gates Foundation, the Microsoft founder aims to gradually give away all his personal wealth of around $118 billion to various causes, protection of the environment chief among them.
In the Middle East, His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice President and Prime Minister of the UAE and Ruler of Dubai announced that his philanthropic foundation, Mohammed Bin Rashid Al Maktoum Global Initiatives (MBRGI), managed to benefit 91 million people worldwide last year. Spending AED1.1 billion in 2021, (AED2.3 billion during the 2-year pandemic), MBRGI’s efforts range from the operation of food banks to WHO pandemic response efforts. As for aiding the environment, MBRGI delivered 58 water projects last year, focusing on sustainable solutions to provide clean water.
Fuelling the rise of ESG as standard practice
Looking beyond the immediate and tangible impact of these towering philanthropic displays, the actions of such billionaires are beneficial in another way. As the old adage goes: ‘money follows money’ and the overt investment of so much capital is in itself supporting the rising trend of sustainable financing.
‘Thinking ESG’ (Environmental, social, and governance) is a mentality being adopted by every major bank, lender and financial powerhouse with a view to stay ahead of the money markets. ESG revenue pools could rise to $285 billion for the global banking industry in the next decade, and Global professional services firm, Alvarez & Marsal says that the top performing banks of today are those who have committed to sustainable, ethical financing models in a big way. It estimates that the top 25 US and European banks alone have already committed $12.58 trillion for sustainable finance as targets by 2030, representing 37% of total bank assets or 15% of global GDP.
Within these broader targets lie crucial goals for climate change action and widespread environmental protection/conservation efforts. Aligning to net-zero operations, direct green financing, phasing out coal use and investments, carbon offsetting and other eco-sustainability-based targets are no longer the sole purview of niche investment groups and green-minded banking heads – ESG is fast becoming standard practice.
Thinking sustainable is the basis of sound business for the next century
ESG is quickly moving beyond a trend and settling into a mentality that extends well beyond the banking industry, diving into every facet of modern business operations and investments. In July this year, Invesco’s Global Sovereign Asset Management Study 2022 found that 75% of sovereign wealth funds now have an ESG policy in place. With tens of trillions of dollars held in global assets, these funds regularly set the investment pace and provide the example for which their respective national and regional money markets will broadly follow.
As they turn their efforts to combatting climate change, in step with the actions of a growing band of billionaires, they can bring unprecedented financial muscle to bear. This is fortunate, given the size, scale, complexity and lethal implications of the challenge we all currently face in the race to literally save the planet.